NCLAT upholds Go First's insolvency order, lessors asked to move NCLT

On May 10, the principal bench of NCLT at Delhi admitted Go First's voluntary plea to initiate an insolvency resolution process.

In what came as a relief for Go First, the National Company Law Appellate Tribunal (NCLAT), on May 22, upheld the NCLT order on the airline's insolvency. The lessors have been asked to move an appropriate application at the National Company Law Tribunal (NCLT).

As a consequence of this order, the moratorium that kicked in as a result of NCLT's order will stay in place.

The NCLAT's order has given liberty to the aircraft lessors to file an appropriate application at NCLT for clarification on the applicability of the moratorium on the aircraft for which leases were terminated prior to Go First's insolvency.

The appellate tribunal has also granted liberty to the Interim Resolution Professionals (IRPs) to move an application at NCLT with respect to the claims of both parties relating to the aircraft in question.

The NCLAT has directed the NCLT to decide the applications of the lessors and IRP without being influenced by any observations made by it.

The aircraft lessors to Go First, such as SMBC aviation capital, SFV Aircraft Holdings and GY Aviation Lease, challenged the order of the NCLT admitting the cash-strapped airline's plea for insolvency. The lessors argued at the NCLAT that Go First is using the insolvency proceedings to hold on to aircraft that it does not own.

Aircraft lessor SMBC called into question the rationale behind Go First filing for voluntary insolvency despite having 26 functional aircraft and taking bookings for future dates.

SMBC Aviation claimed that it has unpaid dues of Rs 700-800 crore from Go First. SMBC further argued that the NCLT did not provide them with an opportunity to present their side of the case and admitted Go First's plea for insolvency without ascertaining the entire situation.

The aircraft lessor argued that they had already terminated the leases before the NCLT-ordered moratorium. However, they are not able to obtain possession of aircraft owing to the tribunal's order. Citing aviation rules, the leasing company argued that Go First cannot operate aircraft once the lease is terminated.

Go First argued that it had initiated insolvency proceedings with bonafide intentions to protect the 7,000 employees in its rolls and ensure that the country's aviation sector enjoys healthy competition. The airline dismissed the claims made by lessors stating that it had malafide intentions.

Go First's IRP, represented by his lawyer, argued that the airline owes over Rs 1,000 crore to its vendors and that the insolvency process will only help it repay its dues.

The tribunal reserved their plea for judgment on May 15.

On May 10, the principal bench of NCLT at Delhi admitted Go First's voluntary plea to initiate an insolvency resolution process.

The tribunal appointed an IRP while suspending the board and putting a moratorium on the debt-ridden airline's financial obligations.

Founded by billionaire Nusli Wadia, Go First, earlier GoAir, filed for bankruptcy on May 2, blaming US engine maker Pratt & Whitney for the grounding of half of its fleet.

The ultra-low-cost airline has liabilities worth around Rs 11,000 crore.